There’s a gap in the IP insurance market to support pioneering SMEs

There’s a gap in the IP insurance market to support pioneering SMEs | Insurance Business Asia

There’s a gap in the IP insurance market to support pioneering SMEs

Intellectual properties (IP) are behind most of the technological advancements people benefit from in today’s world. However, IP issues are often taken for granted and laws are poorly enforced, leading to violations such as IP theft and fraud.

To raise awareness of how intellectual properties impact daily life, the World Intellectual Property Organisation has designated April 26 as World Intellectual Property Day. The day also seeks to celebrate creativity, and the contributions made by creators and innovators to the development of societies worldwide.

In observance of World Intellectual Property Day, Insurance Business spoke with Angela Kelly (pictured left), CEO and country manager for Lloyd's Singapore, and to Mark Waters (pictured right), legal expenses underwriter at Antares, regarding the landmark deal between Lloyd’s and the Intellectual Property Office of Singapore (IPOS) signed last year, which seeks to help start-ups and other small and medium enterprises protect their intellectual property rights.

Read more: Lloyd's to help Singapore's bid as IP and innovation hub

According to Waters, the IP landscape in Singapore is well supported, managed, and promoted by the government through the IPOS. However, from an insurance perspective, awareness of the protection that IP insurance could give to IP holders and licensees is virtually non-existent. This, he said, is a function of the very limited provision of this type of cover in the region and a tendency for insurers that do provide cover to focus more on larger corporates. 

“There’s clearly a gap in the market for a product to support pioneering SMEs,” he said. “However, an additional difficulty in the landscape exists – insurance penetration and distribution. SME IP asset owners and licensees know they need to protect their assets but have historically not really been aware of where to go to get the protection they need, and this has broader development and growth implications for the sector. The partnership with the IPOS is changing this and creating pathways to access insurance protection where it is needed most.”

Waters added that an IP filing can come at a huge cost for smaller innovators, so he recommends that major investments such as IPs should be protected through the insurance market.

This is where the agreement between IPOS and Lloyd’s comes in. According to Kelly, under the agreement, Lloyd’s Asia and IPOS will work together to introduce new IP insurance products that are tailored to meeting the changing needs of enterprises – such as when attracting capital, averting business interruption, and strengthening negotiating positions when using IP in the course of business.

“The collaboration between Lloyd’s and IPOS will also enhance innovation not just in terms of new IP insurance products and offerings but will also address the development and distribution of IP insurance,” she said. “IP insurance will help in mitigating the risks of IP infringement, including defraying legal costs of possible subsequent IP rights enforcement.”

However, several challenges exist for this line of business, Kelly said. One of which is the difference between intellectual properties and tangible properties such as buildings or machinery, which people are more familiar with.

“In this regard, Lloyd’s will work with IPOS to jointly organise a series of seminars, helping to expand its network and reach out to companies over the next two years,” she said. “This will promote Lloyd’s and Singapore, as a centre for excellence in IP commercialisation, IP rights protection and the availability of underwriting expertise for IP insurance.”

How does IP insurance work?
According to Waters, IP insurance works by giving the policyholder the financial capacity to protect their rights, adding that the key issue in IP is having the ability to enforce one’s rights once held.

“This is often a key mistake that innovators fail to consider – they might formulate a fabulous idea or come up with an amazing invention, but before attempting to commercialise these ideas, any savvy investor or business partner will want to understand how the company is going to protect their innovation and will it stand up as unique in the face of competition,” said Waters. “It’s vital that when commercialising for the first time or entering a new market, one has the ability to protect their rights.”

With regard to IP infringement, this normally involves ensuring access to funds for lawyers’ fees to take action against infringers or to stave off potential IP infringements. Without access to such funds, it would be impossible to prevent infringement and thus maximise returns from the innovation.

“The ability to deal with Lloyd’s via local brokers is important as it means IP asset owners can maintain their existing local relationships and be closer to their insurers,” Waters said. “Local product access also fosters a better understanding of their needs and a proactive dialogue on issues impacting their segment.”

According to Kelly, the collaboration between Lloyd’s and IPOS is beginning to bear fruit. The parties have successfully conducted two seminars, which provided over 100 SMEs a better understanding of how to protect their valuable assets.

“We will continue to implement plans to develop new products and expand our network,” she said. “As a strategic business tool, IP insurance will allow companies to take on a larger capacity in mitigating their risks as they commercialise their intangible assets and IP. Insurance for IP will only continue to become increasingly important and there is growing business potential and increasing opportunity in the sector for insurers to capitalise on.”